Despite tightening efforts on the part of the Chinese government, Chinese property prices rose by 0.53 percent in May according to the CREIS 100-city real estate prices indices[1]. China has been trying to lower transaction volumes in order to avert the formation of a real estate bubble that many government officials fear could ultimately devastate the economy. The Chinese government has taken price curbing measures and stopped lending on development almost completely, but property prices are currently remaining high. However, analysts believe that “sooner or later” developers will have to cut prices on housing as their finances are stretched thin by lack of new funding.
Outside of the country, many countries that export building materials to China are becoming concerned about what will happen if the government does not ease up on new construction and development. China currently is estimated to consume about half of all global commodities like cement, iron ore, steel and coal[2]. Not surprisingly, Chinese real estate is the main driver behind that demand and construction accounts directly for about 40 percent of Chinese steel usage alone. The Chinese government is building “tens of millions of state-subsidized apartments” for Chinese citizens who have been priced out of their own homes by the housing bubble. Officials hope that projects like this will “continue the investment and construction boom” despite other tightening measures.
Do you think that China can continue its growth indefinitely? What do you think will happen when the bubble bursts?
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[1] http://www.businessinsider.com/china-real-estate-prices-rose-by-053-in-may-2011-6
[2] http://www.ft.com/cms/s/0/8b198ae2-8b9e-11e0-a725-00144feab49a.html?ftcamp=rss#axzz1O84IeTLo
Have you looked at the ghost cities in China? The prospect of them ever being lived in is remote, as are many of those cities!
The Chinese government is padding the real estate market on one hand, and trying to reign it in on the other, how well has it worked here?
The whole thing is just one more example of big government screwing things up and soon they too will have a housing bubble burst! We may have trouble learning about it here for awhile but when they stop buying commodities, if will not be too hard to figure out.
Like everything that goes up, it has some nature of natural limit, China is no exception. When their bubble burst, all of the world will suffer, just like when our bubble burst!
Large economies have large fallout when they go down!
I think all of us understand that economies can only grow as much as their people grow. China has a huge export industry currently that could shift to internal economy like the US did with industry and domestic construction booms. Would like to have a chunk of the change being made over there as many chinese investors profitted from the booming american economy of the past. Profits earned from builing will be curbed when the number of desirable properties surpasses the number of people looking for suitable properties. Hard to imagine China overdeveloping. Could be a long run for them… Would like to find a way to buy and hold for Short Term.. Anyone know how to predict the burst of the bubble? Feel like I should; maybe the eas of obtaining unsecured loans or equity loans would be good indicators.